General Insurance - Life Insurance
What are the 5 Characteristics of an ideally Insurable risk?
1. Loss must be due to chance 2. Definite and measurable 3. Statistically predictable 4. Not Catastrophic 5. Coverage can not be mandatory
How does the premium mode affect the total premium paid for insurance for the year?
A higher frequency of premium payments will result in higher overall premium
Who must be a member of insurance guaranty associations?
ALL insurers authorized to write insurance within a state
When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?
Adverse selection
According to the Law of Agency, a principal is represented by whom?
Agent or Prodcuer
What are the four elements of an insurance contract?
Agreement, Consideration, Competent parties and legal purpose
What type of insurer is formed under the laws of another country?
Alien
What is a warranty in an insurance contract?
An absolute true statement upon which the validity of the insurance contract is based
When must insurable interest exist in a life insurance policy?
At the time of application
When must the policy summary for a life insurance policy be delivered to the policy owner?
At the time of policy delivery
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?
Authorized or Admitted
What happens to the cash value when a life insurance policy matures?
Cash value is paid to the policy owner
What document is required for an insurance company to transact insurance?
Certificate of Authority
When a change needs to be made on the application for insurance, which is the best method for correcting the information?
Complete a new application or ask the applicant to initial the correction on the original application
What are the 3 main instances when insurable interest exists in life insurance?
Insuring your own life, the life of a family member, or the life a business partners or someone who has a financial obligation to the policyowner
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
It will decrease
What type of insurance creates an immediate estate?
Life Insurance
Mortality tables are used by insurance companies to predict what?
Life expectancy and the death rates for specific groups of individuals
Insurance is a contract that protects the insured from what?
Loss
The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?
Loss
What is included in part 2 of a life insurance application?
Medical Information about the prospective insured
All other factors being equal, which premium payment mode will require an overall higher premium: Monthly or Annually?
Monthly
An applicant conceals relevant health information on the application. The applicant presents what type of hazard?
Moral
A person who does not lock the doors to his or her house shows an indifferent attitude. This person presents what type of hazard?
Morale
What are the three factors that determine the premium for a particular life insurance policy?
Mortality, Interest, Expense
An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?
Mutual
Can insurers advertise the existence of the guaranty association during solicitation and sale of insurance policies?
No, Advertising of the existence of the guaranty association for the purposes of solicitation and sale of insurance policies by the insurer is an illegal business practice.
What is the term for the causes of loss insured against in an insurance policy?
Peril
What type of life insurance offers an applicant a cash value element?
Permanent Insurance ( Usually Whole Life)
What are the three types of hazards?
Physical, Moral, Morale
What document describes the specific information about a policy?
Policy Summary
What term describes the fee a person pays an insurance company to receive coverage?
Premium
What is the term that describes the frequency and the amount of the premium payment?
Premium Mode
What is the purpose of insurance guaranty associations?
Protect policy owners, insureds, and beneficiaries from financial losses caused by insolvent insurers
What are strategies used by underwriters to prevent adverse selection?
Restriction of coverage Refusal to accept a high risk, Accepting a risk at a higher rate
What is the main responsibility of a company's underwriting unit?
Risk Selection
If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?
Send the application back to the applicant for the signature
Wagering on a sporting event is known as what type of risk?
Speculative
What are the personal uses of life insurance?
Survivor protection, estate creation and conservation, cash accumulation and liquidity
When planning for survivor in life insurance, what needs to be considered?
Th insured's current assets, liabilities and survivors' needs
Whose responsibility is it to determine that all the questions on an insurance application are answered?
The AGENT'S
A business is the owner and beneficiary of a key-person life policy. when the business collects the policy benefit how is it taxed?
The Benefit is received tax free
Who is the beneficiary on a key-person life insurance policy?
The Employer
Who is responsible for the contents of insurance advertisements?
The Insurance Company
Who must have insurable interest in the insured?
The Policy Owner
What is the purpose of the agent's report during the application process?
The agent's report discusses the agent's personal observations about the proposed insured that may help in the underwriting process
If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern?
The existence of insurable interest between the applicant and the insured
What entities make up the Medical Information Bureau?
Insurers
Who owns stock companies?
stockholders
What do individuals use to transfer their risk of loss to a larger group?
Insurance
In the agents/insurer relationship, who is considered the principal?
Insurer
Insurers are classified according to their domicile. What are the three types of insurers?
Domestic, Foreign, Alien
At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?
Either on the date of application or the date of the medical exam (whichever occurs last)
What are the three types of Agent Authority?
Expression, Implied, Apparent
The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agents responsibility?
Fiduciary
An insurance company is domiciled in California and transacts insurance in Nevada. What is this insurers classification in Nevada?
Foreign
Conditions that increase the chance of a loss are known as what?
Hazards
What type of report provides information about the applicant's hobbies, habits and financial status?
Inspection Report
What are two elements necessary for a life insurance contract to have a legal purpose?
Insurable interest and consent
In calculating the amount of life insurance needed, what is the needs approach based on?
The predicted needs of a family after the premature death of the insured
What is insurance underwriting
The process of risk selection and classification
What is the purpose of key person Insurance?
To minimize the risk of financial loss caused by the death of a key employee
For the purpose of insurance, what is risk?
Uncertainty of loss
In insurance, when is the offer usually made on a contract?
When the insurance application is submitted
In forming an insurance contract, when does acceptance usually occur?
When the insurer approves a prepaid application
What are illustrations in a life insurance policy?
presentations of nonguaranteed elements of the policy
What type of risk is insurable?
pure
